I hope you had a Happy Halloween!
Hopefully, you are not suffering from Samhainophobia – the morbid fear of Halloween, in which case I probably just lost you as a reader of my newsletter. Boo!
According to FearOf.Net -
“The term Samhainophobia originates from ‘Samhuin’ meaning summer’s end. The Samhain festival was celebrated by the Celts for marking the transition between summer and winter. The word Samhuin has Irish-Scottish-Gaelic roots generally meaning ‘All Hallows Eve’.” What? Irish-Scottish-Gaelic roots, you ask. Aye, Ireland is believed to be the birthplace of Halloween. For more fun, interesting facts about Halloween check out this article.
Halloween has been a big deal in our family for many years. I remember my mom and dad making handmade costumes for my sisters and me. We did the same with our kids and even now we celebrate Halloween as adults, thanks to a son-in-law who is passionate about decorating their house with ghastly creatures, ghosts and mechanical moving figures that have the neighbors coming by for more than just handouts of sweets. Over the weekend Mike and I attended their annual Halloween party – what fun! It is always fun to dress up in costume and be someone you are not.
Whether you suffer from Samhainophobia or not, be safe out there and watchful of the little goblins in your neighborhood.
Don’t be Tricked: Treat your Business to a Valuation
One of the major reasons, most businesses never ultimately get sold is because of what is known as the “value gap” – the difference in what a business owner thinks the business is worth and what a potential buyer is willing to pay. Another reason business owners aren’t able to sell when they want to - the owner finds out (sometimes too late) that the sales proceeds of the business fall short their retirement needs when they go to sell the business.
Talk about scary!
Waiting until you are ready to sell your business or when a valuation is a must (death, divorce, buying out a partner) can have some unintended results and surprises. So why not be proactive and get some important information you can use now by getting your business valued?
The value of a business, when it comes right down to it is, well, elementary multiplication. (See my blog post to for a quick math lesson.) If you can impact one or more factors in your business in a positive way (think increased cash flow and reduced risk) then you can enhance value.
Not only can a business valuation be a real eye opener, but has the added value of providing useful information you can use now such as:
Identify Risks and Weaknesses
A business valuation takes a looks at your company from an outside investor standpoint, analyzing the company’s strengths and weaknesses and identifying risks inherent in your business. No matter what your company’s strengths are, too many weaknesses will diminish the value of your company.
Through qualitative and quantitative (industry comparison) analysis, strengths, weaknesses and risks are identified. Use the information gathered from the business valuation to help you identify areas you need to work on in order to reduce risks in your business. Doing this sooner rather than later gives you the time to make the necessary adjustments before taking your business to market. Even if you don’t plan on selling your business right away, reducing risk in your business has added benefits – like sleeping better at night and ridding the business of skeletons in the closet.
Identify Real Cash Flow
When it comes to buying a business, acquirers want a business that shows a healthy, sustainable cash flow. Why? Cash flow is how acquirers measure the return on their investment. If a business can’t support the repayment of the loan they will get to purchase your business, then you won’t have a deal. Cash flow is one of the main characteristics, if not THE main thing, a prospective buyer will look at.
A business valuation takes an in-depth look at your profit and loss statement in order to determine what the real cash flow of the business is. Cash flow is “normalized” for owner perks, unusual and non-recurring events and market rates (think owner compensation) in order to identify true cash flow. Knowing and understanding what your business cash flow is (not just how much you take home) will uncover opportunities to improve your cash flow, enhance margins, and provide a host of other benefits.
What You Don’t Know CAN Hurt You
I personally don’t like surprises, unless they are pleasant ones. As a business owner, you certainly don’t want to be caught off guard when it comes to selling your business. Even if you aren’t looking to sell your business, why wouldn’t you want to have a business valuation performed on your business now in order to benefit from the knowledge to improve your business and make it more
valuable – now and in the future?
A final thought…
Over the past few of months
I have introduced you to my Transition RoadMap®. If you missed these newsletters you can read them here. The Transition RoadMap® is specifically designed to help you begin thinking about your business as an outside investor would. Whether you are looking to sell your business or just want to enhance value, the Transition RoadMap® should be part of your overall business strategy.
Be sure to enlist the services of a credentialed valuation professional and one that does more than just generate a valuation report.
Ready to get started?
Email me or call me at 970-389-4802 for a free initial consultation and let’s get to work on your business valuation.
Stay Tuned!
Stay tuned.
Next month we look at common drivers of business value and what you can do to enhance value.
Have a great month!
Don't want to miss the next issue? Get my newsletter ETS Compass right in your in box. Sign up here.
ETS Compass is my personal newsletter that provides thought-provoking topics and helpful guidance to business owners looking to navigate change in their businesses. Whether it is value enhancement or transition planning, it is my goal to educate you.
My goal is to provide useful and purposeful information to you that may help you transition from your business.
Author: Sheryl Brake
Sheryl is the CEO and Founder of Encompass Transition Solutions, LLC and former partner of a top 25 national accounting firm. She has been working with business owners in a wide variety of capacities for more than 30 years. Sheryl lives in her home state of Colorado with her husband, Michael.